By Sabrina Corlette, Jack Hoadley, Katie Keith, and Olivia Hoppe
Most employers are implementing few, if any, changes to their health plans for the 2020 plan year. That’s not surprising – employers are generally reluctant to make big or abrupt adjustments to provider networks or cost-sharing that could cause pushback from employees. But many health care experts believe that if we’re ever to truly tackle out-of-control health care costs in this country, the employer community needs to take the lead.
A newly released report from Georgetown CHIR finds, however, that there are significant challenges facing insurers and employers who seek to constrain the rising provider prices that have driven the annual family premium above $20,000 this year. In six market-level, qualitative case studies, we examined strategies that private insurance companies and employer-purchasers use to limit health care costs and how these strategies are affected by increased provider consolidation. We focused on the following mid-sized health care markets, all of which had recently experienced some kind of provider consolidation activity:
- Detroit, Michigan
- Syracuse, New York
- Northern Virginia
- Indianapolis, Indiana
- Asheville, North Carolina
- Colorado Springs, Colorado
Across the six markets, we found:
- Hospitals are empire-building. Hospitals’ motivations for consolidation are similar, with stakeholders reporting a pursuit of greater market share and a desire to increase their negotiating leverage with payers to demand higher reimbursement.
- Payers have tools to constrain cost growth, but they lack the incentive and ability to deploy them effectively. While payers in our markets identified several cost containment strategies such as narrow networks and provider-payer partnerships, all come with downsides. Furthermore, some third-party administrators for self-insured employers actually have incentives to keep provider prices high when they’re paid a percentage of the overall cost of the plan.
- Employers’ tools to control costs are limited. Employers are frustrated with existing strategies to reduce cost growth such as the exclusion of certain providers or higher deductibles in the face of employee dissatisfaction and limited evidence of savings. However, emerging strategies that could be more effective may be challenging for many employers to implement, and employers lack access to basic data to inform their efforts.
- Public policy strategies have had limited effectiveness. Anti-trust and other policies to limit the ill-effects of consolidation have had a limited impact in our study markets, but there are nascent state-level efforts to push back on provider prices that are worth watching.
Read the full report here.
Read the case studies and interim report here.
The authors are grateful to the National Institute for Health Care Reform for its generous support of this project.
2 Comments
This research was funded, in substantial part, by the nonprofit National Institute for Health Reform, which is an educational arm of the pharmaceutical industry. Whereas hospitals assemble monopolistic “empires” through their control of physical capital — facilities such as hospitals, clinics and testing centers, where health professionals work — pharmaceuticals exercise monopoly power through drug patents. Monopoly fosters price gouging in both sectors. But by far the larger component of health spending is health services, not drugs. In fact, the great majority of prescriptions are for drugs that are off patent, whose prices generally keep track with or fall relative to inflation. Most of the increase in pharmaceutical prices comes from the 10% of patented drugs that are brand name. In both cases, price controls might help to restrain consumer costs. The administration has proposed linking US brand name drug prices, paid by both public and private health plans, to those paid in other developed countries. But no politician, so far at least, has advocated allowing employer health plans to pay Medicare rates — as Medicare Advantage plans do. Medicare prices for all would save the average working family of four about $10,000 this year. It’s time we considered this option.
You are incorrect. The National Institute for Health Reform, which helped to fund our research work, is a health care foundation formed pursuant to a settlement agreement between the United Auto Workers union and the Big 3 automakers (Ford, GM, and Fiat-Chrysler). You can read more about them here: https://www.nihcr.org/national-institute-for-health-care-reform-nihcr/. Furthermore, as lead author of the report, I can assure you that no one at NIHCR had any editorial input or say in our research questions, methodology, or findings.
Sincerely,
Sabrina Corlette
1 Trackback or Pingback